Heading for a crash

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Perrorist
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Heading for a crash

Post by Perrorist » 04 Mar 2017, 06:49

I know I sound like a doom-and-gloom merchant, but the rapid increases in house prices (almost 19% year-on-year in Sydney) cannot continue. The government's had every chance to stop this, but panders to its property-owning supporters. When the crash comes, as now seems inevitable, we'll all feel the pain. I've warned about these events before and been right, so there's a good chance I will be again.

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Buck_naked
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Re: Heading for a crash

Post by Buck_naked » 04 Mar 2017, 08:54

Are you prepared to walk to Mt Kosciusko if you get it wrong like Steve Keen? :lol: :lol: :lol:

http://www.abc.net.au/news/2016-07-29/a ... ys/7674154

It's been 25 years since a recession, the smashed avocado crowd will get a huge shock when it hits. :eek :eek

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Tedwalker
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Re: Heading for a crash

Post by Tedwalker » 04 Mar 2017, 11:15

I agree Perry.
My 40 years of real estate experience told me that all booms come to an end.
This one will be either a crash, or at least a fairly rapid decrease in prices, and all the side effects that go with this.

:eek :eek

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Perrorist
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Re: Heading for a crash

Post by Perrorist » 04 Mar 2017, 12:51

I predicted the crashes in 1987 and 2008. Unlike some, I didn't suffer financially, because I took precautionary action.

I thought at the time that Steve Keen had it wrong, as he'd not taken the supply shortage into account. That's much less of a problem this time around. I agree prices will drop, but not by 40-70% if there are no other factors involved.

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Re: Heading for a crash

Post by Perrorist » 22 Mar 2017, 09:16


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kfchugo
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Re: Heading for a crash

Post by kfchugo » 22 Mar 2017, 10:41

I have worked in mortgage lending all my life and have never seen a "crash" in the major population centres. I think we may certainly get a "plateau" of housing prices and a period of slow growth but I dont subscribe to the "crash" theory.

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Re: Heading for a crash

Post by Buck_naked » 22 Mar 2017, 11:07

If Melbourne and sydney are taken out of the calculations the rest of the country looks pretty normal within reasonable bounds.

So why can't the reserve bank/gunnerment selectively apply measures to 'cool' Sydney and Melbourne?

They could apply a blunt instrument and wack the whole country over the head, - Western australia is already on its knees,
it would be dead, buried cremated.

I have seen some some slumps in my day in sydney, 10-20% falls in prices.
Boom bust mining towns have seen massive falls, thats normal for them
For massive slumps in capital cities there would have to be a 1929 style crash, - massive unemployment rates

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Perrorist
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Re: Heading for a crash

Post by Perrorist » 22 Mar 2017, 12:50

Prices fall and then plateau, often for quite long periods. My concern is with the record debt levels needed to service these purchases. People can easily find themselves out of their depth once rates rise or their employment situation changes.

Australia is not immune to global forces. Signs of inflation are already appearing in Europe and the US. Interest rates will increase accordingly. We'll be forced to follow, however belatedly.

In the past, wages have risen to try to compensate for rising prices (not that they've succeeded, because of taxation), but that won't happen while demand for labour is low and looks to stay that way.

This time round, it's a whole new ball of wool.

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kfchugo
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Re: Heading for a crash

Post by kfchugo » 22 Mar 2017, 13:26

It is a certainty that we have reached the bottom of the interest rate cycle and they can only go up from here - the question is by how much? I have no doubt that many who borrowed at low interest rates will run into trouble as rates increase and we may well see a wave of foreclosures. Home owners will become renters but with the level of demand, I still cant see a "crash" in real estate prices. Always interesting to debate these things and I suppose that "only time will tell".
Strangely, such is not the case in the U.S. and property prices often fluctuate and people often lose money on real estate investments. In Australia, one of RE Sales most useful quotes has been "time is your friend"......not always so in America.

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Perrorist
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Re: Heading for a crash

Post by Perrorist » 22 Mar 2017, 15:09

In the US in 2008, house prices crashed by as much as one-third. Whole streets of abandoned houses resulted in some parts of the country.

"The mortgage and credit crisis was caused by the inability of a large number of home owners to pay their mortgages as their low introductory-rate mortgages reverted to regular interest rates. Freddie Mac CEO Richard Syron concluded, "We had a bubble",[36] and concurred with Yale economist Robert Shiller's warning that home prices appear overvalued and that the correction could last years, with trillions of dollars of home value being lost.[36] Greenspan warned of "large double digit declines" in home values "larger than most people expect."[34]"

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kfchugo
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Re: Heading for a crash

Post by kfchugo » 22 Mar 2017, 15:35

That was the Global Financial Crisis, Perry and brought about by banks and other lenders in the U.S. lending indiscriminately to those who could not repay, often with inflated property valuations. Different here, we have very tight restrictions on our lenders (especially since 2008). Our banks now have strict "affordability" criteria in lending plus must hold significant cash reserves with the Reserve Bank. I am not saying it cant happen again, but at least Australia is well prepared - even better than we were in 2008.

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Re: Heading for a crash

Post by Slapsy » 22 Mar 2017, 17:30

Probably talking rubbish now but,in 1970 when I applied for a mortgage,I had to prove my earnings without overtime. My wife's earnings were not considered. It was,at that time,a large amount,but compared to house prices today,I wonder if the same criteria is used.
The punters know that the horse called Morality rarely gets past the post,whereas the nag called Self-interest always runs a good race. ..... Gough Whitlam 19/10/89

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Re: Heading for a crash

Post by Perrorist » 22 Mar 2017, 17:57

Slapsy: In 1977 the Commonwealth Bank were prepared to advance me 75% of their valuation and they needed my payslip to make sure I wasn't repaying more than a third of what I was earning. Them were the days.

kfchugo: Our banks and other mortgage lenders have until recently been enticing lenders with all kinds of offers to get them to borrow. It's just a matter of degree.

Interesting to see the markets are in trouble today. Trump is certainly proving to be a source of instability in global affairs. Surely they'll remove him soon before it gets worse, as it definitely will.

BTW, back in '87 I was working at the Sydney Stock Exchange helping to computerise stockbroker systems when Black Friday occurred. I ventured onto the trading floor to witness the excitement and it was an amazing sight -- all that adrenaline! On the second occasion, Peter Marshman, the CEO or chairman of the ASX, collared me and turfed me out. Still, it was a moment in history.

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kfchugo
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Re: Heading for a crash

Post by kfchugo » 22 Mar 2017, 18:42

Moments like that certainly stick with you forever.......those were the days. I fondly recall doing loans with three pieces of paper.....The application, the contract (with terms and conditions on the back) and a Payroll deduction form. These days you need to kill a couple of trees to do the same deal.
:thinking:

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Re: Heading for a crash

Post by Buck_naked » 22 Mar 2017, 20:09

I predict there will be a crash. a huge crash. people are gunna die.
When???
Sometime in the next 100 years.
See the problem? :lol: :lol: :lol:

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